Correlation Between Consumer Goods and Consumer Services
Can any of the company-specific risk be diversified away by investing in both Consumer Goods and Consumer Services at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Consumer Goods and Consumer Services into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Consumer Goods Ultrasector and Consumer Services Ultrasector, you can compare the effects of market volatilities on Consumer Goods and Consumer Services and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Consumer Goods with a short position of Consumer Services. Check out your portfolio center. Please also check ongoing floating volatility patterns of Consumer Goods and Consumer Services.
Diversification Opportunities for Consumer Goods and Consumer Services
-0.53 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Consumer and Consumer is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Consumer Goods Ultrasector and Consumer Services Ultrasector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Consumer Services and Consumer Goods is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Consumer Goods Ultrasector are associated (or correlated) with Consumer Services. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Consumer Services has no effect on the direction of Consumer Goods i.e., Consumer Goods and Consumer Services go up and down completely randomly.
Pair Corralation between Consumer Goods and Consumer Services
Assuming the 90 days horizon Consumer Goods is expected to generate 3.53 times less return on investment than Consumer Services. But when comparing it to its historical volatility, Consumer Goods Ultrasector is 2.12 times less risky than Consumer Services. It trades about 0.08 of its potential returns per unit of risk. Consumer Services Ultrasector is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 5,362 in Consumer Services Ultrasector on September 3, 2024 and sell it today you would earn a total of 1,900 from holding Consumer Services Ultrasector or generate 35.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Consumer Goods Ultrasector vs. Consumer Services Ultrasector
Performance |
| Timeline |
| Consumer Goods Ultra |
| Consumer Services |
Consumer Goods and Consumer Services Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Consumer Goods and Consumer Services
The main advantage of trading using opposite Consumer Goods and Consumer Services positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Consumer Goods position performs unexpectedly, Consumer Services can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Consumer Services will offset losses from the drop in Consumer Services' long position.| Consumer Goods vs. Consumer Services Ultrasector | Consumer Goods vs. Industrials Ultrasector Profund | Consumer Goods vs. Financials Ultrasector Profund | Consumer Goods vs. Health Care Ultrasector |
| Consumer Services vs. Royce Global Financial | Consumer Services vs. Vanguard Financials Index | Consumer Services vs. Davis Financial Fund | Consumer Services vs. Icon Financial Fund |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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